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Tech's biggest companies could still evade Washington's wrath

The tech giants are too big. They’re getting bigger. We can stop them. But in all likelihood, we won’t.

The history of American business is one of repeated cycles of unfettered, sometimes catastrophic growth followed by periods of reflection and regulation. In previous eras of suffocating corporate dominance over our lives — when industrialists gained an economic stranglehold through railroads and vast oil and steel concerns, or when rampant financial speculation sent the nation into economic paroxysms — Americans turned to their government for a fix.

In the last half-century, lawmakers and regulators set up a regime to improve the safety of automobiles and other manufactured goods, to break up a telephone monopoly that controlled much of the nation’s communications and to loosen the fatal grip that tobacco companies held over American society.

We are now at another great turning point in the global economy. A handful of technology companies, the Frightful FiveApple, Google, Microsoft, Facebook and Amazon, the largest American corporations by stock-market value — control the technological platforms that will dominate life for the foreseeable future.

Yet despite their growth and obvious impact on the economy and society, technology has long been given a special pass. For nearly two decades, under Republican and Democratic presidents, most tech giants have been spared from much legislation, regulation and indeed much government scrutiny of any kind.

Now, that attitude is beginning to change. I spent the past several weeks talking to people in government and public policy circles about whether we should begin thinking about how to curb the tech giants’ power through government — and, if so, how.

There are growing efforts in Washington to do something about big tech. The recognition that networks like Facebook, Google and YouTube played a great and mainly hidden role in last year’s presidential election has spurred an urgent effort to regulate political ads online.

On the left, there has been a surge of interest in rethinking antitrust policy to deal with the most economically impactful of the Five — Amazon, Facebook and Google. Republicans have been more muted, but there are wisps of concern, especially from the Steve Bannon wing of the right. Mr. Bannon, the Breitbart chairman and former presidential adviser, has repeatedly assailed tech companies for their liberal worldview and what he calls their threats to free speech. And, as my colleague Cecilia Kang notes, media, telecom and other industries are pushing these arguments on both sides.

But there is little to suggest we’ll see drastic action anytime soon. Among policy intellectuals, there is far from universal recognition that the tech giants’ vast powers might be harmful. The intellectual underpinnings for how to regulate one or two or several of the Five remain vague. The political will to do so is even more elusive; the tech companies remain exceedingly popular, and they are using their vast fortunes to acquire political and cultural clout.

“Individuals, lawmakers, we’re all feeling a rapid loss of control and power around these companies,” said Barry Lynn, the director of the Open Markets Institute, a liberal think tank that opposes concentrated corporate power. For many years, he said, tech giants have been considered essentially untouchable — so big that even contemplating taking them on prompts political paralysis.

Mr. Lynn thinks that view is shifting. In June, Open Markets was forced from its previous home, the New America Foundation, reportedly because of pressure from Google, a huge New America funder. (Google and New America have denied that claim.)

“Our firing has transformed the discussions among people about the power of these companies,” Mr. Lynn said. “Folks in this town saw this, noticed it, and I’d bet a lot of money a year from now we’ll see real huge shifts in feelings around here.”

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Part of what has hampered governmental action against the Five is the unusual nature of their power. Much of what they do now, and will soon have the power to do, exceeds what we’ve ever expected from corporations. In different ways, they each collect, analyze and mediate our most important public and personal information, including news, political data and our relationships. They’re being called upon to police free speech, terrorism and sex trafficking, and to defend nations and individuals against existential digital attack.

They’re creating machines that could one day approximate and surpass human intelligence — a technological achievement that may come with as many complications as the advent of nuclear weapons. And all of them figure into economic inequality in the United States, since their digital wares provide vast riches to a relative few employees and investors in liberal West Coast enclaves, while passing over much of the rest of the world.

But in other ways, the Five do not cleanly fit traditional notions of what constitutes dangerous corporate power. Only a couple of them enjoy monopolies or duopolies in their markets — Google and Facebook in digital ads, for example.

Apple’s iPhone is the world’s most profitable product, its App Store the most important digital marketplace, and yet two out of three smartphones sold in the United States are not iPhones.

Amazon is considered ground zero in the vast transformation of American retail, and is implicated in the unfolding story of how our jobs and our lunches will be gobbled up by machines. But only in the last year did Amazon’s annual revenue surpass that of Costco. It does not yet enjoy a majority share of online commerce in America, has a single-digit share of American retail and is still a minor satellite compared with Walmart’s sun.

Then there is our own complicated relationship with the tech giants. We do not think of them in the same way we think of, say, the faceless megacorps of Wall Street. The Five’s power comes cloaked in friendliness, utility and irresistible convenience at unbelievable prices. We hooked our lives into them willingly, and then we became addicted to them. For many Americans, life without all but one or two of them might feel just about unlivable.

“We’ve all become a bit cyborg,” writes Franklin Foer, the former editor of New Republic, in “World Without Mind,” one of several new books examining the giants. “What we need to always remember is that we’re not just merging with machines, but with the companies that run the machines.”

The complicated nature of the Five’s power has sparked novel ideas about how to regulate them. In January, Lina M. Khan, a fellow at Open Markets, published an article in The Yale Law Journal arguing for a complete reconception of antitrust laws to deal with the rise of Amazon. Ms. Khan argued that the modern view of antitrust laws, which were conceived under the Reagan administration, overemphasized low prices as a test for whether a company is gaining too much market power.

Because Amazon manages to keep lowering prices, the antitrust authorities have overlooked other harms caused by Amazon’s growth, she said, including the way it has created platforms for shipping and cloud storage that give it deep hooks into much of the rest of the economy. Open Markets has offered a similar critique of Google and Facebook.

Yet these ideas are controversial even among liberals, in part because it’s politically perilous to argue that consumers should somehow be suspicious of lower prices. Diana Moss, the president of the progressive American Antitrust Institute, told me that we didn’t need new rules to go after tech firms; we just needed stronger enforcement.

That, too, seems to be lacking. Under the Obama administration, tech companies were treated solicitously by the government. European regulators have pursued Google and accused it of abusing its search monopoly, but the Federal Trade Commission closed a 2013 review. During last year’s presidential campaign, Donald J. Trump talked often about quashing tech power, but he hasn’t done much in office to carry that out. Amazon’s purchase of Whole Foods, for example, sailed through regulatory review.

Put all this together and you get a story of apathy and indecision in the face of colossal corporate power.

“We are looking at a set of circumstances where the monopolies have become so much more pervasive and intrusive,” said Gary Reback, a Silicon Valley antitrust lawyer who took on Microsoft at its peak two decades ago, prompting the historic trial against the company.

Mr. Reback, who is now working against Google, argued that the government’s antitrust prosecution of Microsoft had altered the company’s culture — which in turn created room in the market for entrants like Google and Facebook.

A similar revival could be in the offing if we started policing today’s tech giants. But that’s a big if.

“The big hurdle is, are we going to decide to address these problems as a society?” Mr. Reback said. “Had we been more diligent, we wouldn’t have nearly the problems we have today.”

Follow Farhad Manjoo on Twitter @fmanjoo

Source: Tech CNBC
Tech's biggest companies could still evade Washington's wrath

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